- Peloton is ending in-house production of the exercise bikes that earned the fitness company a fanatical following.
- The New York-based company announced it will cease operations at Tonic Fitness Technology.
- Rexon Industrial will become the primary manufacturer of Peloton’s bicycles and treadmills.
Peloton is ending in-house production of the exercise bikes that earned the connected fitness company a fanatical following, in the latest strategic rethink to follow the sharp reversal in its financial fortunes.
The New York-based company announced it will cease operations at Tonic Fitness Technology, a Taiwanese manufacturing facility it purchased for approximately $45 million less than three years ago. Rexon Industrial, an additional Taiwanese company with which Peloton has collaborated for several years, will become the primary manufacturer of Peloton’s bicycles and treadmills.
Barry McCarthy, the former Netflix, and Spotify executive hired as Peloton’s CEO in February described the move as a natural progression in the company’s strategy to simplify its supply chain and focus on software and content rather than hardware, where he has been attempting to increase profit margins.
“We anticipate that this move, together with others, will allow us to continue decreasing the cash strain on the firm and increasing our flexibility,” he said.
McCarthy said that cash outflows had left Peloton “thinly capitalized” for a company of its size. In May, Peloton reported that it had concluded its fiscal third quarter with only $879m in unrestricted cash and cash equivalents.
McCarthy has subsequently borrowed $750 million in fresh finance from lenders, including Blackstone and Apollo, in an effort to reduce yearly expenditures by $800 million by 2024.
However, its stock price has plummeted below $9 per share, reducing its equity worth to $3 billion from a record of about $50 billion in late 2020, when investors thought that the pandemic-fueled spike in demand for at-home exercise would continue.
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